Initial Coin Offerings (ICOs, also known as token sales or coin sales), typically involve the creation of digital tokens – using distributed ledger technology – and their sale to investors by auction or through subscription, in return for a crypto-currency such as Bitcoin or Ether (or more rarely for government-backed or official fiat currency (such as the US Dollar or the Euro)). These offerings are not standardized, and their legal and regulatory status is likely to depend on the circumstances of the individual ICO.

There are clear risks associated with these offerings. ICOs are highly speculative investments in which investors are putting their entire invested capital at risk. While some operators are providing legitimate investment opportunities to fund projects or businesses, the increased targeting of ICOs to retail investors through online distribution channels by parties often located outside an investor’s home jurisdiction — which may not be subject to regulation or may be operating illegally in violation of existing laws — raises investor protection concerns. There have also been instances of fraud, and as a result, investors are reminded to be very careful in deciding whether to invest in ICOs.

In its meeting on 18-19 October 2017, the Board of the International Organization of Securities Commissions (IOSCO) discussed the growing usage of ICOs to raise capital as an area of concern. Following this meeting, IOSCO issued a statement to its members regarding the risks of ICOs and referenced various approaches to ICOs taken by members and other regulatory bodies. A sample of communications issued by authorities is available at link: http://www.iosco.org/publications/?subsection=ico-statements. The IOSCO Board has also established an ICO Consultation Network through which members can discuss their experiences and bring their concerns, including any cross-border issues, to the attention of fellow regulators.

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